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Over 99 per cent of businesses will now be able to fully expense eligible depreciable assets immediately, in what has been proclaimed as the largest investment incentive provided by a government.
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$27bn ‘game changer’ business tax break announced
06 October 2020
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Treasurer Josh Frydenberg has unveiled a temporary supercharged instant asset write-off that will see businesses with turnover up to $5 billion be able to deduct the full cost of eligible depreciable assets of any value.
Assets will need to be acquired after 7.30pm on 6 October and must be first used or installed by 30 June 2022.
At a cost of $26.7 billion over two years, the measure is expected to be available to 3.5 million businesses, employing over 11.5 million workers.
The government expects the measure to cover $200 billion worth of investments, including 80 per cent of investment in depreciable assets by non-mining businesses.
Small and medium-sized businesses with an annual turnover of less than $50 million will be able to fully expense second-hand assets.
Mr Frydenberg said the measure was a “game changer” and would incentivise businesses to bring forward new investments to boost the nation’s economic recovery.
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“Building on the successful expansion of the instant asset write-off during the COVID crisis, tonight we go further, announcing the largest set of investment incentives any Australian government has ever provided,” Mr Frydenberg said.
“It will unlock investment. It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs.
“Small businesses will buy, sell, deliver, install and service these purchases. Every sector of our economy, every corner of our country, will benefit.”
Eligible businesses that acquire eligible new or second-hand assets under the enhanced $150,000 instant asset write-off by 31 December 2020 will also have an extra six months, until 30 June 2021, to first use or install those assets.
Small businesses with turnover of less than $10 million will also be allowed to deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies.
Rules that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out will continue to be suspended.
The Institute of Public Accountants general manager of technical policy, Tony Greco, said that while the measure might not have been the investment allowance that the Business Council of Australia had called for, this new instant asset write-off was not to be scoffed at.
“The measure isn’t capped, so it really is still quite generous and it applies to business of up to $5 billion,” Mr Greco said.
“People have to acknowledge it is quite a huge investment by the government, assuming you have the cash and the confidence to take advantage of it.”
Likewise, CPA Australia’s Elinor Kasapidis said that while the measure was welcomed, businesses may not be in a position to consider investing in assets.
“What we’re hearing from members at the moment is that a lot of clients just simply aren’t in a position right now to take advantage of it, so it may take some time before the benefits of it are realised,” Ms Kasapidis said.
Chartered Accountant Australia and New Zealand tax leader Michael Croker said it would now be a waiting game to watch the behavioural response of businesses.
“In the absence of confidence about jobs and financial matters, in the absence of consumer and B2B demand for products and services, and lacklustre export markets, it is really interesting to sit back and watch whether the tax breaks will encourage behavioural change and get people and businesses spending,” Mr Croker said.
“It’s part of a really big puzzle and the Treasurer has basically pulled the only levers that he has got left.”
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